No. 14891 IN THE SUPREME COURT OF THE STATE OF MONTANA 1980

EDWARD J. GALLAGHER, Plaintiff and Appellant,

VS. CHARLES G. JOHNSON, Defendant and Respondent.

Appeal from: District Court of the Third Judicial District, Honorable Gordon R. Bennett, Judge presiding. Counsel of Record: For Appellant: Knight, Dahood, Mackay & McLean,Anaconda, Montana Wade Dahood argued, Anaconda, Montana For Respondent: Gough, Shanahan, Johnson & Waterman, Helena, Montana Ronald Waterman argued, Helena,Montana Michael J McKeon,Anaconda, Montana

Submitted: February 27, 1980 Decided: @$+ 

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+ - , 5.4Q Filed: .!Mr. Justice Gene B. Daly delivered the Opinion of the Court. The plaintiff-appellant, a public officer, filed a complaint in libel on June 2, 1978, in the District Court of the Third Judicial District, in and for the County of Deer Lodge. A motion to dismiss was filed by respondent on June 16, 1978. After submissionof briefs on the motion the District Court denied the motion to dismiss and ordered appellant to file an amended complaint. Appellant filed his amended complaint oil December 19, 1978. A motion to dismiss the amended complaintwas filed by respondenton January 2, 1979. Thematter was briefed, argued and the court granted respondent's motion to dismiss. The decision of the District Court rested on legal questions only and at the pleading stage few facts were developed. Some background information is found in the record. Appellant is a residentand native of Anaconda, Montana. Since 1970 he has been the Director of the Urban DevelopmentAgency for the City of Anaconda, agreed to be a public office. Until his death, respondent also resided inAnaconda and was a self-employed businessman. Respondentwas apparently well known for his outspoken views and criticism of the management of civic affairs in the City of Anaconda and Deer Lodge County. One way he expressed those views was to buy advertising space in the local newspapers where he would set forth his positions on a wide range of subjects. The difficulties leading to this case arose when respondent began questioning actions of the Urban Renewal DevelopmentAgency personally and in his advertisements.Appellant alleged inhis amended complaint thathe was

a public officer and thatrespondent had made statements which were false, defamatory and circulatedwith the intent

toaffect the good name, reputation and occupation of appellant. He identifiednine separate instances where statements weremade which he considered tobe libelous. In its order dismissing the cause the DistrictCourt found that a number of the alleged libelousparagraphs were too vague to constitute libelper se and that therewas some question whether thewords set forthconstituted libelby inference (perquod). The conclusion reached by the District Court was thateach statement, construed in the light most favorable toappellant, constituted libelper quod, if the statementswere libelous atall. Since no specific damages were alleged inthe complaint, the DistrictCourt concluded no cause of action had been stated and the complaintwas dismissed. Appellant brings this appeal from the judgment of dismissal. The issuespresented for review by thisCourt concern whether the DistrictCourt erred ingranting the motion for dismissal and, more specifically: 1. Whether a public official seeking to recover for alleged libelous or slanderous statements must plead special damages specifically beyond good name, reputation, and occupation, etc., if the statements are libelper quod and not susceptible of dollar and centsproof. 2. Whether actualmalice must be specificallypleaded to satisfy the requirements of the FirstAmendment of the United StatesConstitution.Appellant's contentions are: 1. Respondent's publications have been injurious to the person and occupation of the appellant and the complaint in its entirety sets out a sufficient claim of injury by defamation to warrant a jury trial to determinewhat remedy is appropriate. 2. Statements by the respondent set forth in paragraph IV (1) and (2)of the amended complaint constitute slander within section 27-1-803,MCA, and reference to Montana case law shows that this slander, ifwritten, would constitute libel per se. Manley v. Harer (1925), 73 Mont. 253, 235 P. 757;Burr v. Winnett Times Pub. Co. (1927),80Mont. 70, 258 P. 242. 3. Paragraph

### V of appellant's amended complaint, alleging that respondent intended by his statement and publications to have the people of Deer Lodge County believe that appellantwas dishonest, acted illegally and had been violating the law, was sufficient in this era of notice pleading to plead special damage by way of injury to appellant's occupation. As a public official whose effectiveness relies solely upon the public's confidence in his actions and intentions, appellant's damage cannotbe measured in terms of lost contracts or personal business opportunities. Appellant, therefore, sufficiently pleaded special damages resulting from injury to him in his occupation to allow this

cause to go before a jury. 4. Appellant in partV of his amended complaint alleged that respondent "knewthat said words were untrue and in preparing, composing, and causing to be circulated said defamatory words 

# .. . acted with specific malice 

# .. ." The clear weight of authority has been found to show thatthis allegation is sufficient to state the actual malice standard required by New York Times Co. v. Sullivan (1964), 376 U.S. 254, 84 S.Ct. 710, 11L.Ed.2d 686. 5. The pleadings set forth by appellant in his amended complaint not only conform to the standards set in New York 

### -- Times but also fulfill the requirements of Rule 9(b) M.R.Civ.P. Respondent reliesmainly on the argument that in Montana specific damagesmust be pleaded and proven to support a claim for libel per quod. Special damages must not only be suggested in the complaint but the facts constituting special damages "mustbe alleged or no cause of action is stated." Lernrner v. The "Tribune" (1915), 50Mont. 559, 148 P. 338. Second,respondent contends the failure to allege the factswhich constituted actual malice also warranted dismissal of the action. Regarding public officials, the FirstAmendment requires that before recovery for libel, the plaintiff must plead and prove the publication was false and

wasmade with actualmalice. New 

### -- York Times, 376 U.S. at 279-80, 84 S.Ct. at 726, 11L.Ed.2d at 706. InMontana libel is defined as: 

# ".

. . a false and unprivileged publication by writing, printing,picture, effigy, or other fixed representation to the eye which exposes any person to hatred, contempt, ridicule, or obloguy or which causes him to be shunned or avoided or which has a tendency to injure him in his occupation." Section 27-1-802,MCA. Slander is defined as: 

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. .a false and unprivileged publication other than libelwhich: "(1) charges any person with crime or with having been indicted, convicted,or punished for crime; "(2) imputes in him the present existence of an infectious, contagious,or loathsome disease;"(3) tends directly to injure him in respect to his office,profession, trade, or business, either by imputing to him general disqualification in those respects which the office or other occupationpeculiarly requires or by imputing something with reference to his office,profession, trade or business that has a natural tendency to lessen itsprofit; "(4) imputes to him impotence or want of chastity; or "(5) by natural consequence causes actual damage." Section 27-1-803,MCA. The District Court in itsmemorandum presented a condensation of the case law on libel and slander in Montana which it used as a standard for judgment of this complaint, stating: "For some reason, enshrouded by the mists of time and accretions of common law and the Field Code, a formal distinction ismade in our code between libel and slander. (MCA 27-1-802 and 803.) Both are false and unprivileged publications which cause injury by defamation (including, specifically, the imputation of impotency in the case of slander). Beyond that, they are superficially different, but the differences are insignificanthere. 

# .. . 'Words are defamatory

### per se which upon their face and without the aid of extrinsic proof are injurious to the person concerning whom they are spoken.' Manley v. Harer, 73M 258. They must be susceptibleof but one meaning (Brownv. Independent Publishing Co., 48 M 380), and that an opprobrious one. (Burrv. Winnett Times, 80M 75). If the words are not defamatory 

### -- per se they cannot be made so by innuendo.



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# . . To determinewhether the words constitute libel 

### per se theymust be construed in relation to the entirepublication, which must in turn be viewed as a strangermight look at it,without the knowledge possessed by the parties concerned (Brown, supra,pg. 380). Their injurious character must be a fact of such common notoriety as to be established by the general consent of men so that the court takes judicialnotice (Griffinv. Opinion Publishing Co., 114M 508). In a word, the insultmust be obvious. "Generally, if the words are defamatory

### per se, damage ispresumed and general damages 

# may be recovered without allegation or proof of special damages (Paxtonv. Wocdward, 31 M 209). See discussion of exception that must be made in the case of alleged libel of public official, below. If the words are 

### - not defamatory per 

### -- se factsmust be pleaded which show the words are libelous and special damagesmust be specially pleaded, according to all the Montana cases fromLedlie v. Wallen (1895) 17M 155 to Steffes v. Crawford (1963) 143M 47. A complaint based on per quod defamation failsto statea cause of 

### -- L action if special damages arenot alleged (Griffin, supra, 508). Factsmust be pleaded which show the character and extentof the injury (Manleyv. Harer, 73 M 259). It isnot enough, according to theMontana cases, toaver generally thatinconsequence of thepublication the plaintiff has been damaged inhisbusiness. The facts showing such damages must be alleged or no cause of action is stated (Lemmer v. The "Tribune", 50 M 565). While there areno reported Montana cases on the subject, there seems tobe no reason why this state would not follow the several states, apparently the unquestioned maioritv. which find insufficient a complaint based on per quod defamation resulting 1; state specialpecuniary loss for which recovery is sought. These states require allegations as to particular contracts, sales, employments, etc., lostbv reason of the defamation. See 53 CJS 272. Libel Slander, Section 170 (d) and 50 Am Jur 2d' 945, Libel & Slander, Section 420. I gather from a check on some of the cases cited under these sections that relaxation of specificity requirements under modern pleading practice has not discernably altered thisrequirement. As noted, I would apply allof the above principles without discriminating between libel and slander pleadings." (Emphasisadded.) With the above ground rules inmind, the DistrictCourt engaged ina paragraph-by-paragraph discussion of the amended complaint and concluded that "allof the statements set forth inthe separateparagraphs of allegation #IV, together with their associated allegations, constitute libelper - quod, if they are libelous -- atall, and must 

### ---- fail for lack of allegationof specificdamages." (Emphasis supplied.) - - The District Court further concluded that even if all the statements were clearly libelper se, the complaint would fall shortof stating a cause of action because no specific factswere alleged to support the malice allegation.For some reason, which isalsoenshrouded by themists of very recent time, none of the parties presented for consideration tothe DistrictCourt themost recent case onthis subject, Madison v. Yunker (1978), Mont. 589 P.2d 126, 35 St.Rep. 1311,where this Court stated: "Finally,in Gertzv. Robert Welch, Inc., supra, the Supreme Court, while allowing states to provide for libel suits, erected a fence around the amount of damages recoverable: "'We would not, of course, invalidate state law simply because we doubt its wisdom, but here we are attempting to reconcile state lawwith a competing interestgrounded in the constitutional command of the FirstAmendment. It is therefore appropriate to require that state remedies for defamatory falsehood reach no farther than is necessary to protect the legitimate interest involved. It is necessary to restrict defamation plaintiffs who do not prove knowledge of falsity or recklessdisregard for the truth to compensation for actual injury. We need not define "actual injury," as trial courts have wide experience in framing appropriate jury instructions in tort actions. Suffice it to say that actual injury is not limited to out-of-pocket loss. Indeed, the more customary types of actual harm inflicted by defamatory falsehood include impairmentof reputation and standing in the community,personal humiliation, and mental anguish and suffering. Of course, juries must be limited by appropriate instructions,and all awards must be supported by competent evidence concernins the injury, although there need be no evidence which 

### --- assigns an actual dollar value to the injury. - -- "'We also find no justification for allowing awards of punitive damages againstpublishers and broadcasters held liable under state-defined standards of liability for defamation. In most jurisdictions jury discretion over the amounts awarded is limited only by the gentle rule that they not be excessive. Consequently, juries assess punitive damages inwholly unpredictable amo~~nts bearing no necessary relation to the actual harm caused. And they remain free to use their discretion selectively to punish expressions of unpopular views. Like the doctrine of presumed damages, jury discretion to award punitive damages unnecessarily exacerbates the danger of media self-censorship,but, unlike the former rule, punitive damages are wholly irrelevant to the state interest that justifies a negligence standard for private defamation actions. They are not compensation for injury. Instead, they are private fines levied by civil juries to punish reprehensible conduct and to deter its future occurrence. In short, the private defamation plaintiff who establishes liability under a less demanding standard than that stated by New York Timesmay recover only 

### --- such damages as are sufficient to compensatehim for actual injury.' 418 U.S. at 349, 350, 94 S.Ct. at 3012."In thiscase, defendants have constantlyreferred toMadison asa 'public officialt,apparently tobring thiscase under the umbrella of New York Times Co. v. Sullivan, supra. We are skeptical that the director of the print shop atthe University of Montana, Missoula, Montana, isindeed a 'public official'. In Gertz v. Robert Welch, Inc., supra, it was held that a lawyer was not a public official, although he had taken on a prominent case and was by vir- "ue of his profession an officer of the court. Likewise, itmay be contended inthe retrial that Madison is a 'public figure'. Whatever his status, it isa guestion for thejury to deter- --- 

### -- mine, because of the constitutionalprovision -- 

### that the under the instructions of the court -- - ----- is thejudge of both lawand fact. Article 11, 

### -- ----- Section 7, 1972Montana Constitution. With

# z-- propriat6 instructions, the jury can determine these matters and their status inany trial, -unlessotherwise stipulated. "In thiscase, therefore, applying the rationale of the cases of the United States Supreme Court on damages for libel, if Madison is considered tobe a private person, he must prove: (1)that the published material was false; (2) thatdefendants arechargeable with fault inthe publication; and (3) that actual injury tohim ensued, for which he may recover his actual damages. Moreover, (4) if he proves that the publication was made by defendants with knowledge of its falsityor inreckless disregard for the truth or falsities thereof, he may recover punitive damages for such malice, but such malice does not include hatred, personal spite, ill-will or a desire toinjure. New York Times Co. v. Sullivan, supra; Letter Carriers v. Austin (1974), 418 U.S. 264, 94 S.Ct. 2770, 41L.Ed.2d 745. "If Madison is a public official or public figure, he mayrecover only 

### -- if he proves the threshhold 

### --- fact thatthe publicationwas made 

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### -- for itstruthor falsity. He could then recover his actual andpunitive damages." (Emphasis added.) 589 P.2d at132-33. Madison has adequately statedMontana's position on the two legal problems presented here. We have adopted the position of New York Times v. Sullivan, supra. SinceNew York Times was decided by the United States 

### -- Supreme Court in 1964, a defendant in a libel action has been accorded an additional FirstAmendmerlt protection in themaking of defamatory statements concerning public offi-cials. Unless he made them with "malice," that is to say that unless he knows the statements to be false, or makes them with recklessdisregard for the truth, or in fact entertained serious doubts about their truth, or had a high degree of awareness of their probable falsity, he will not be held liable in a libel action. Suchmalice does not include hatred,personal spite, ill will, or desire to injure. The District Court here, in following New York Times 

### -- and its progeny, correctly held that it is incumbent upon appellanthere to prove actual malice if he is a public official. He went one step farther,,i1(3wever,and ruled that appellant also had to plead the facts to support the conclusion that the defamationwas knowingly and/or recklessly published. In hismemorandum, the District Court gave the following rationale for the above ruling: "Theworking principle Iwould rely on was stated by the Idaho Supreme Courtbefore the Sullivan case. Gough v. Tribune-Journal Company, 1954, 275 P2d 663, 667, 668." New York Timesv. Sullivan, supra,does not require the additionalpleading of the supportive fact,nor does Montana. See,Madison v. Yunker, supra;Rule 9,M.R.Civ.P. Therefore, the additional requirement is in error. On the second issue concerned with the pleading of special damages under the circumstances of this case, this Court had never specifically ruled on the matter before Madison. Ithas been well cared for in that opinion. On the matters before this Court,we find appellant has met the proper standard of pleading his cause. Therefore, the judgment and order of dismissal of plaintiff-appellant's complaint by the District Court isreversed, and the cause remanded tothe District Court for further proceedings, consonant with thisopinion. Costs to appellant.



## !u22 4 Justice

We concur: 

# %A&*%-& Chief Justice

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# u&--Q ,M-+/ Justice

Mr. Justice Daniel J. Shea dissents, and willfilea written dissent later.